Bank of Shanghai $1.6 billion IPO oversubscribed 763 times in biggest Shanghai listing this year

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SHANGHAI (Reuters) - Bank of Shanghai Co’s (601229.SS) 10.7 billion yuan ($1.58 billion) initial public offering, the Shanghai bourse’s largest this year, was oversubscribed by a factor of 763, according to a calculation by Reuters from two filings on Thursday and Friday.

Mainland China listings are often oversubscribed hundreds of times because regulators cap the valuation of IPOs, guaranteeing investors they will not lose money. The oversubscription levels mean that large amounts of capital are briefly frozen until stocks to buyers, squeezing liquidity for would-be investors.

According to statements made to the Shanghai stock exchange in the seventh IPO by a Chinese lender this year, the 600.45 million shares on offer were sold at 17.77 yuan per share, and were oversubscribed by institutional and retail investors combined by a factor of 763.

Bank of Shanghai’s listing comes eight years after it first sought IPO clearance: last year, IPOs were slowed to steady the market after stocks crashed in July. The bank is ranked China’s 20th largest by assets as of the end of June, according to bank data website Relbanks.

The bank, established in 1995 and with 314 branches in cities across the country, said in its prospectus funds will be used to boost capital. China’s banks have taken various measures to bolster capital, such as issuing asset-backed securities, to counter an onslaught of soured debt and dwindling margins.

The bank’s price-earnings ratio will be 8.26 after the sale, according to a separate filing. That compares with an average of 7.66 for listed peers, according to data from the Shanghai stock exchange.

At the end of last year, the bank reported net profit of 13 billion yuan, up 14 percent from 2014, according to a filing on its website. Assets at the end of the first half of this year were valued at 1.62 trillion yuan, according to its prospectus.

The IPO was sponsored by Guotai Junan Securities and a subsidiary of Shenwan Hongyuan Securities.